Long-Term Care Policies - Worth it?

My parents have been leveling with me about their retirement/estate planning over the holidays. My knowledge on these things is lacking.

They’re doing alright. Slim savings but seems doable. They have some financial advisor who seems to be on the same page.

They’re looking into a long-term care policy and I wanted to get opinions on the value. Having never looked into it this seems like a good idea. Since the advisor is recommending it, I’m cautious, but my parents say he’s advised them away from things that would have benefited him at their expense.

I believe they’re hoping to pay their own way through assisted living if possible rather than rely on Medicaid.

This policy has them pay around $60,000 today with no subsequent premiums. Then they’re eligible for about $150,000 in benefits if they used it on day 1, or about $220,000 after an inflation adjustment if they use it beginning age 80, in about 12 years.

There is also a death benefit of approximately $70,000 if they die without using the policy (a profit, not accounting for time-value.)

Based on what they told me about a grandparents’ recent nursing home stay, it seems $220k might last them between 2-7 years depending on the level of assistance they need (say, just an in-home nurse for a few hours 5 days a week versus constant care.)

I’ve told them (1) see if they can do a policy with no death benefit, as neither the kids nor a surviving parent need the payout, and (2) don’t just take the policy presented by the advisor, but look around instead.
Any thoughts on the value?


My SO had to deal with all this last year with her mother. Her parents did not have a lot of savings, or a LTC policy, and their only option was Medicaid. I think Medicare will cover the first 100 days, but has a rehab requirement to qualify.

I agree with looking for the option without the DB as it sounds like their real need is to fund care. That 70k sounds like it will not change anyone’s life. That could cut back the premium quite a bit, or allow them to get a more generous LTC benefit.

I personally bought an LTC policy for myself as I would like to stay well ahead of this…the agent kept me away from the combo products due to cost/needs and said to think of it like homeowners insurance where you may never use it but when you do, you are really glad you have it. I purchased a benefit for about 50% of what I think the actual expense of FT care at a nice place might cost. I’ll have plenty of savings to cover the rest, and there is a whole range of costs starting with home care that won’t come near the actual max monthly benefit. The policy also offers a lot of support in terms of having reps to help navigate the different options, which after seeing what my SO had to deal with could be really valuable. Not directly related, but I think some of those considerations might be worth thinking about.


The way I look at it once you enter a long term care facility you aren’t coming out alive

If you are poor Medicaid will provide for you but you will have to go somewhere that accepts Medicaid/medicare - which is a lot of places

If they have a modest $1-5 million then I would just self insure against this event

$5 million plus you can get a life insurance policy with nursing home benefit for tax benefits

Really there is very little need for ltc insurance and premiums are insanely high due to low lapse rates, high utilization, low mortality

This is a product I would stay away from in general due to rate spiral and companies going bankrupt

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I’d hope our LTC actuaries have done a reasonable job making pricing adjustments in the last decade, but this is certainly a good point to consider on which company to purchase a policy from.

Their hands are tied. Rates have to be as low as possible or else no one will sign up. Rates are dangerously low to encourage enrollment or else the brokers flee and the company goes under.

High first year commission to encourage agents to push the product

Then rates are jacked up as high as state insurance departments will allow in an effort to slowly boil the frogs and induce lapsing

This product is terrible by design

And ultimately it is unnecessary outside of wealth preservation purposes

Do we have any LTC actuaries on this board?

I must admit my ltc insurance exposure is limited to FSA readings - which were pretty damning

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I dunno US, sorry. but I looked at Canadian LTC policies some years ago and the lack of guarantees made them virtually worthless.

There is some degree of guaranteed backing in the USA if your issuing company collapses, but not 100% backing

FWIW, the advisor said said “there’s no right or wrong answer, but I recommend this policy”. So seems like he wasn’t being aggressive nor saying it was obviously the right choice.

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By guarantee do you mean in case the LTC insurer goes bankrupt? Surely these are sold by the big life companies so they’re basically too big to fail (that’s how I think about NY Life anyway…), or is that incorrect?

I forget how but I’m pretty sure GE Capital was able to snake their way out of the LTC game by selling off their horrendous book of business to LTCA or Genworth or something of that nature

Similar to a pension buyout

I think they are talking about rate guarantees.

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I’d hope Nationwide (the policy presented to them) isn’t going to fold anytime soon. Can always be surprised over 20 years but it isn’t some here-today gone-tomorrow company insuring Flood in Florida.

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Correct. The policy guarantees were non-existent.

Has anybody had experience with claims on a LTC policy?

The advisor was touting Nationwide’s policy because they pay providers directly as opposed to other companies which often require you to request reimbursement after paying.

I assume Nationwide is not unique in this but perhaps is a standout process over others.

I’m hoping there isn’t a pile of non-obvious constraints in actually using the policy. From a search online I don’t see any major horror stories of worthless LTC policies not paying where they are expected to.

The companies will be fine. Rate increases are certainly a possibility, but the industry has already been burned pretty badly, so I’d be surprised if the increases on newer issues would see anything comparable.

I have an LTC policy. Just got the rate increase notice. 9.9% increase this year and each of the next 2 years. Benefit is about $500K, not inflation adjusted. I could reduce benefits to try and maintain premium, but I can afford the rate increase at this time.


Non-LTC actuary here. How easy is it for rate increases to get approved? Like, does it only happen in response to something that was unforeseeable to the entire industry, or is it pretty much routine?

I don’t see how it affects OP, though, as was considering a single-premium policy. Can those still be retroactively nerfed?

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I priced LTC in the 1980s, unlimited benefits, level proposed rates were very high. I told the company that nobody would believe how much it should cost, and that it needed a Federal backstop. They heeded my advice, didn’t try to sell it.

Market-share-seeking carriers convinced actuaries to use more “competitive” assumptions. Lapse support and double-digit investment returns enabled lower rates. When ultimate lapses dropped to ~1%, and yields to single digits, the original rates became woefully inadequate.

Because lapses were low, early profits looked high, but long-term losses loomed. Large rate increases were fairly easy to justify, but they didn’t shock policyholders into lapsing. Carriers learned that everybody was persisting until they had a claim.


Yeah, if you lapse, you forfeit the policy reserve, don’t you?

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